Understanding the Hedge Structure

The hedge structure of the bomb shelter combo trade involves selling short options while simultaneously buying long puts to mitigate risk. Specifically, for every short contract sold, two long puts should be purchased, with their expiration dates being shorter than the short option. For instance, if a trader sells a 120 DTE short put, they would buy two long puts at 90 DTE, costing only one-tenth of the short's credit. This structure is intended to enhance the hedge's effectiveness by keeping the long options closer to the money, thus providing stronger risk protection.